Question

A quota on imported avocadoes ______________ the price of avocadoes, _____________ consumers’ surplus for avocado buyers, _______________ producers’ surplus of avocado growers and __________________ tariff revenue. Because the loss to _____________ is more than the gain to ___________________, there is a net loss to society.

Answer 1

Answer:

The correct answer is: increase; reduce; increase; does not generate; consumers; producers and government

Explanation:

A quota is a trade restriction that limits the quantity imported of a good. An import quota on avocadoes will reduce the supply of avocadoes. This will cause the price of avocadoes to increase. This increase in price will reduce the consumer's surplus and increase the producer surplus.  

A quota does not generate any revenue for the government.  

This imposition of quota creates a deadweight loss for the society as the loss in consumer surplus is greater than the increase in producer surplus and government revenue.